Beer sales slide as global alcohol consumption falls

‘Worst year for beer volumes since 2009’ in the US as drinkers turn to spirits

People are drinking less, according to industry figures that make sobering reading for brewers and distillers banking on growth from rising numbers of youngsters reaching legal drinking age.

The global market for alcoholic drinks contracted 1.3 per cent last year, which was steeper than the average fall of 0.3 per cent in the previous five years, according to figures from the International Wine and Spirits Research, the London-based industry group.

Alexander Smith, editor of IWSR magazine, said the drop was surprising given an improving global economy and the usually close correlation between global growth rates and drinking alcohol

Global gross domestic product rose 3.1 per cent last year, according to the International Monetary Fund, which forecasts a further improvement to 3.6 per cent this year. “That, allied with the growing global population of legal drinking age consumers, should, theoretically, have led to growing global alcohol consumption, but it didn’t,” said Mr Smith.

He cited continued economic weakness in some emerging markets and an increase in regulation as the most likely reasons for the fall, which was driven by beer, while spirits held reasonably steady with growth of 0.3 per cent. Beer sales fell 1.8 per cent, compared with a five-year average decline of 0.6 per cent. This was mainly because of weakness in China, the world’s biggest beer market by volumes, though sales in other large beer markets, such as Brazil and Russia which have both been in recession, were down. According to FT Confidential Research, China has passed peak beer. While the spirits industry has bounced back from the Beijing’s crackdown on extravagant consumption, beer volumes continue to fall and attempts by domestic brewers to encourage consumers to trade up have so far proved largely unsuccessful. In the US, “2017 is shaping up to be the worst year for beer volumes since 2009, when total industry volumes were down 2 per cent”, according to Trevor Stirling, analyst at Bernstein.

The trend does not augur well for Anheuser-Busch InBev, the world’s largest brewer which derives 30 per cent of its operating profits in North America, where it has been unable to reverse falling sales of its flagship Budweiser and Bud Light brands.

Beer volumes fell 5 per cent in the three months from February to April, according to figures last month by the Beer Institute, the US trade association representing larger brewers.

Mainstream lager in the US has been losing out to more expensive craft beer but beer generally has been losing share to spirits, especially Irish and US whiskies.

The gin revival, mainly centred in Europe, was reflected in a 4 per cent rise in global volumes but vodka’s fall from fashion with millennial drinkers continued with a 4 per cent global drop — though volumes recovered in the US. Diageo, the world’s largest distiller and owner of brands such as Johnnie Walker scotch and Tanqueray gin, said: “Per capita consumption of alcohol in the developed world has been dropping for 30 years.

However, there is a clear and sustained trend of consumers drinking better — not more. This is supported in the IWSR data with the growth of global spirits, particularly whisky, gin and tequila.”

The IWSR said it expected the alcohol industry to return to growth this year, predicting a rise in consumption of 0.8 per cent until 2021, driven by whisky. Plato Logic, the beer market consultancy, forecast growth of 1.3 per cent in the beer industry this year, “assuming some modest recovery in China”, it said.